The market expected the announcement of the end of quantitative easing Wednesday, putting an end to a more than two-year-old asset purchase program.
“Slightly less expected, however, is that despite the recent market volatility, the statement issued after the Federal Open Market Committee meeting was, if anything, more hawkish,” Capital Economics said in response to the announcement.
The new report left out two key details according to Capital Economics:
The statement also dropped the previous assessment that “there remains significant underutilization of labor resources.” The dropping of “significant” could be, well… significant.
There was no mention of the recent market volatility in the statement, or anything about slower economic growth in the euro-zone or China.
Unexpectedly, the Fed still thinks it will be a “considerable time” before it begins to raise interest rates. Indeed, the Zero Interest Rate Policy remains in full force, as it has been since inception at the end of 2008.
“We didn’t expect that language to be dropped at this meeting given there is no scheduled press conference, but we wouldn’t be surprised if it is changed at the upcoming December meeting,” Capital Economics said. “Overall, we still believe that the Fed will begin to raise rates sooner than generally expected, with a March 2015 hike the most likely outcome.”